Category: Litigation
The jury finds shadow trading is a thing
The trial took eight days. The jury took two hours. On Friday, in the case of SEC v. Panuwat, the jury in a federal district court in California determined that Matthew Panuwat was civilly liable for insider trading under the misappropriation theory. This case dates back to August 2021, when the SEC filed a complaint in the U.S. District Court charging Panuwat, a former employee of Medivation Inc., an oncology-focused biopharma, with insider trading in advance of Medivation’s announcement that it would be acquired by a big pharma company, Pfizer. As you know by now, this case has often been viewed as highly unusual: Panuwat didn’t trade in shares of Medivation or shares of the acquiror, nor did he tip anyone about the transaction. No, the SEC’s novel—but winning—theory of the case was that Panuwat engaged in “shadow trading,” using the information about the acquisition of his employer to purchase call options on Incyte Corporation, another biopharma that the SEC claimed was comparable to Medivation, based on an assumption that the acquisition of Medivation at a healthy premium would probably boost the share price of Incyte. Panuwat made over $120,000 in profit. According to a statement from the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, “[a]s we’ve said all along, there was nothing novel about this matter, and the jury agreed: this was insider trading, pure and simple. Defendant used highly confidential information about an impending announcement of the acquisition of biopharmaceutical company Medivation, Inc., the company where he worked, by Pfizer Inc. to trade ahead of the news for his own enrichment. Rather than buying the securities of Medivation, however, Panuwat used his employer’s confidential information to acquire a large stake in call options of another comparable public company, Incyte Corporation, whose share price increased materially on the important news.”
In its discretion, SEC issues stay of final climate disclosure rules
The SEC has determined, in this Order posted today, to exercise its discretion to stay the final climate disclosure rules “pending the completion of judicial review of the consolidated Eighth Circuit petitions.” If you have been following the SEC travails regarding the climate disclosure rules, you know that there were ten different petitions—the tenth petition having been filed by the National Legal and Policy Center and the Oil and Gas Workers Association—consolidated in the Eighth Circuit, challenging the rules and several asking the court for a stay. The SEC had opposed the stay. (See, e.g., this PubCo post, this PubCo post and this PubCo post.) (One of the petitioners, Liberty Energy, even filed a precautionary complaint challenging the final rules in a Texas District Court, just in case jurisdiction was ultimately not accepted in the Court of Appeals.) At the end of March, the SEC had filed a motion to establish a consolidated briefing schedule relating to all of the motions seeking a stay; 31 petitioners opposed the SEC’s motion, instead asking the court to expedite briefing on the existing and expected emergency stay motions. Under the Exchange Act and the APA, the SEC “has discretion to stay its rules pending judicial review if it finds that ‘justice so requires.’” According to the Order, the SEC has determined that justice requires that the SEC stay the final rules.
SEC requests court deny stay in climate disclosure rules litigation
It’s been a day or two now—what’s going on with the SEC’s climate disclosure rules litigation? When we left our tale, petitioners Liberty and Nomad had submitted this notice of pending emergency motion advising the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the rules. And the SEC was directed to file a response by the close of business yesterday. (See this PubCo post.) As directed by the Court, the SEC did submit a letter of response. Now, another petitioner, the U.S. Chamber of Commerce, has also moved for a stay pending appeal. And a new petition for review has been filed.
Back on the SEC climate rules rollercoaster in the Eighth Circuit—will a new stay be granted?
Liberty Energy Incorporated and Nomad Proppant Services LLC decided to give it another go. Are you surprised? In this notice of pending emergency motion, Liberty and Nomad advise the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the SEC’s final climate disclosure rules. As you may remember, a petition for review of the final rules was filed by Liberty and Nomad on March 6 in the Fifth Circuit and their motion for an administrative stay was granted on March 15. That case was just one of nine challenging the SEC’s rules in six different circuits. Upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Following that consolidation order, the Fifth Circuit ordered the transfer of Liberty’s petition to the Eighth Circuit and the dissolution of the administrative stay. (See this PubCo post.)
Stay of SEC climate disclosure rules lifted
As discussed in these PubCo posts from Monday, Saturday, Tuesday and Thursday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits. As previously reported, upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Bloomberg has reported that, of 17 appellate judges in the Eighth Circuit, only one was appointed by a Democrat. Not that the politics should matter, of course.
Judicial Panel consolidates petitions challenging SEC climate disclosure rules
As discussed in these PubCo posts from Monday, Saturday and Tuesday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.”
Where will the fate of the SEC’s final climate rules be determined?
As discussed in these PubCo posts from Monday and Saturday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine filed (so far) challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.” As previously noted, the longevity of the Fifth Circuit stay, as well as the ultimate outcome of litigation about the rules, could well be determined by another court that is designated by the Judicial Panel on Multidistrict Litigation to hear the multiple pending challenges to the rules on a consolidated basis. How does that work? This article in Bloomberg does some explaining.
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